International Accounting:Comparative Accounting

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International Accounting:Comparative Accounting

  1. 1. International Accounting, 7/e Frederick D.S. Choi Gary K. Meek Chapter 3: Comparative Accounting: Europe www.HelpWithAssignment.com
  2. 2. Learning Objectives  Understand how financial reporting is regulated and enforced in five European countries: France, Germany, the Czech Republic, the Netherlands, and the U.K.  Describe the key similarities and differences between the accounting systems of these five countries.  Identify the use of International Financial Reporting Standards at the levels of the individual company and the consolidated financial statements in these five countries.  Describe the audit-oversight mechanisms in these five countries. www.HelpWithAssignment.com
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  4. 4. IFRS in the European Union  Starting in 2005, all EU-listed companies must follow IFRS in their consolidated financial statements.  Generally, IFRS consolidated statements are permitted for non-listed companies.  Requirements for individual company financial statements vary – IFRS may be required, allowed, or prohibited. www.HelpWithAssignment.com
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  8. 8. IFRS (contin)  IFRS are based on fair presentation principles  IFRS may be overridden in rare circumstances to achieve fair presentation  Accounting measurements  Business combinations – purchase accounting  Goodwill – annual impairments test  Investments in associates – equity method  Translation of financial statements of foreign operations – functional currency concept  Assets valued at historical cost or fair value  Research costs – expensed; development costs – capitalized  LIFO not allowed  Finance leases – capitalized; operating leases – expensed  Provisions – recognized when probable and estimable  Deferred taxes – recognized in full, using the liability method, for temporary differences between the carrying amount and tax base www.HelpWithAssignment.com
  9. 9. France  Overview  “The Plan” – national uniform chart of accounts (national accounting code)  Objectives and principles of financial reporting  Definitions of elements  Recognition and valuation rules  Standardized chart of accounts  Model financial statements  Other influences on French accounting rules  Commercial legislation (Code de Commerce)  Tax laws www.HelpWithAssignment.com
  10. 10. France (contin)  Accounting regulation and enforcement  CNC – National Accounting Board  Keeps plan current  Makes rulings and recommendations on accounting issues  CRC – Accounting Regulation Committee  Converts CNC rulings and recommendations into binding regulations  ANC – National Accounting Authority  Will replace CNC and CRC as the national standard setter  AMF – Financial Markets Authority  Supervises securities markets  OEC – Institute of Public Accountants  Represents the accounting profession  Members prepare financial statements, and provide tax, information systems, and management advisory services  CNCC – National Institute of Statutory Auditors  Members audit and give an opinion on financial statements  Must report criminal acts to the High Council of External Auditors  Substantial overlap in OEC and CNCC membership  Statutory auditors not allowed to provide accounting services to the same client  AMF oversees audits of listed companies, but relies on a committee of the CNCC to conduct audit- quality reviews www.HelpWithAssignment.com
  11. 11. France (contin)  Unusual features of French financial reporting  Must report results of environmental activities  Reports aimed at preventing bankruptcies  Social report www.HelpWithAssignment.com
  12. 12. Germany  Overview  Creditor protection  Conservative balance sheet valuations  Reserves as protection against unforeseen risks and insolvency  Accounting is designed to compute a prudent income amount that leaves creditors unharmed after distributions are made to owners  Influence of tax law  Determination principle: taxable income is determined by what is booked in a company’s financial records  Reliance on statutes and court decisions www.HelpWithAssignment.com
  13. 13. Germany (contin)  Accounting regulation and enforcement  German Commercial Code (HGB)  Applies to all business entities  German Accounting Standards Board  Develops recommendations for consolidated financial statements  Financial Reporting Enforcement Panel  Enforces compliance with German financial reporting requirements and IFRS by listed companies  Chamber of Accountants  Oversees WPs (“enterprise examiners”)  Unusual features of German financial reporting  Auditor’s private report to board of directors and supervisory board on company’s future prospects www.HelpWithAssignment.com
  14. 14. Czech Republic  Overview  Accounting changed directions several times in 20th century, reflecting the country’s political history  Until end of World War II – German influences  After World War II – Soviet influences  After 1989 – EU influences (market orientation)  Accounting regulation and enforcement  Ministry of Finance  Oversees Commercial Code (modeled on German commercial law)  Oversees Accountancy Act (based on EU directives)  Chamber of Auditors  Oversees auditors  Unusual features of Czech financial reporting  Form over substance still applies in some cases  Still implementing accounting practices consistent with EU directives and IFRS www.HelpWithAssignment.com
  15. 15. The Netherlands  Overview  Accounting paradoxes  Permissive requirements, but high professional practice standards  Code law country whose accounting is oriented toward fair presentation  Fair presentation orientation developed without a strong stock market  Other influences on Dutch accounting  U.K. and U.S. as much as continental European countries  Accounting profession  Business economics (microeconomics approach)  IASB www.HelpWithAssignment.com
  16. 16. The Netherlands (contin)  Accounting regulation and enforcement  Company law – Act on Annual Financial Statements  Dutch Accounting Standards Board  Develops guidelines on generally acceptable accounting standards  Netherlands Authority for the Financial Markets  Supervises operations of securities markets  Oversees financial reporting and auditing of listed companies  Enterprise Chamber  Enforces compliance with accounting requirements  NIvRA  Oversees auditing profession  Unusual features of Dutch financial reporting  Financial statements may be in Dutch, French, German, or English  Other than consolidated financial statements of Dutch listed companies, financial statements may be based on Dutch guidelines, IFRS, or a combination  Flexible accounting measurements  Current values are permitted for tangible assets  Opportunities for income smoothing www.HelpWithAssignment.com
  17. 17. United Kingdom  Overview  Legacy of British accounting  First country to develop an accountancy profession  Fair presentation (true and fair view)  Exported British accounting around the world www.HelpWithAssignment.com
  18. 18. United Kingdom (contin)  Accounting regulation and enforcement  Companies Act  Broad financial reporting framework  Financial Reporting Council oversees:  Accounting Standards Board  Issues Financial Reporting Standards (FRSs)  UITF clarifies FRSs  Auditing Practices Board  Issues auditing standards  Financial Reporting Review Panel  Enforces compliance with FRSs  Professional Oversight Board  Oversees auditing profession  Audit Inspection Unit  Monitors the audit of listed companies  Accountancy Investigation and Discipline Board  Investigates and disciplines accountants for professional misconduct  Unusual features of British accounting  True and fair override www.HelpWithAssignment.com
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  20. 20. Other Chapter Exhibits www.HelpWithAssignment.com
  21. 21. Other Chapter Exhibits (contin) www.HelpWithAssignment.com
  22. 22. Other Chapter Exhibits (contin) www.HelpWithAssignment.com
  23. 23. www.HelpWithAssignment.com For more details on Accounting Assignment Help visit our website at http://www.helpwithassignment.com/accounting-assignment-help www.HelpWithAssignment.com

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